DAVIS TO PURSUE MISSING MONEY

Campaign funds worth $160,000 part of alleged fraud by former treasurer

San Diego, CA. August 29, 2011---Rep. Susan Davis. member of the Armed Services Committee, during a question and answer session at the San Diego Union-Tribune. Photo by Gerald McClard/San Diego Union-Tribune.

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San Diego, CA. August 29, 2011---Rep. Susan Davis. member of the Armed Services Committee, during a question and answer session at the San Diego Union-Tribune. Photo by Gerald McClard/San Diego Union-Tribune.

Rep. Susan Davis vowed Thursday to aggressively pursue recovering at least $160,000 in campaign funds allegedly siphoned by her one-time treasurer as part of what officials call the largest embezzlement scheme of its kind in state history.

Kinde Durkee is expected to either plead guilty or no contest to a number of felony charges related to the alleged bilking of high-profile Democrats when she appears in federal court in Sacramento today. There have been reports that prosecutors will ask for a prison sentence of up to 14 years.

“It’s good that the first phase of this investigation is over,” Davis, D-San Diego, said in a statement. “I remain unsympathetic to someone who continually embezzled from people engaged in the democratic process or charitable pursuits.”

The federal charges made public thus far do not allege that Durkee embezzled money directly out of Davis’ account, although investigations continue and Davis has filed a lawsuit to recover some funds.

Various reports indicate Durkee may have misappropriated as much as $7 million from dozens of clients, including $4.5 million from U.S. Sen. Dianne Feinstein.

Orange County attorney Atticus Wegman, who represents Davis and others in related civil suits filed against Durkee in Los Angeles Superior Court, said in an interview that the federal documents released publicly “are not absolutely complete in terms of all of the misappropriations in such a widespread fraudulent scheme. …”

Wegman said the objective of the limited federal filing was to “establish enough evidence that would be sufficient to prove the five counts of mail fraud. There’s a lot more to it.”

Durkee was arrested in 2011. Her attorney has declined various interview requests.

In her lawsuit, Davis alleges “fraud and deceit” and seeks damages from Durkee. Her lawsuit is joined by fellow Reps. Loretta and Linda Sanchez, who are sisters. Combined, they seek to recoup $1.4 million. Davis reported a $160,000 loss to the Federal Election Commission.

In that suit, Davis alleges that Durkee wrote 14 unauthorized checks. Four of those in June 2009 amounted to a combined $83,000.

Court papers also allege that Durkee filed a number of false campaign reports. For example, on June 30, 2009, Durkee reported Davis’ campaign balance at $533,570.26 when, in fact, it was $949.31. Durkee reported Davis’ cash on hand in September 2010 at $534,971.99 when the amount was actually $29,009.87, the lawsuit claims.

“In March 2011, Durkee … depleted the Susan Davis for Congress account to a point where the ending balance was $148.34,” the lawsuit alleges.

It’s still unclear where the money went.

No trial dates have been set. But Wegman indicated that once the criminal prosecution concludes the parties can turn their attention to the civil courts. The various cases are expected to be consolidated.

Through her campaign, Davis declined to elaborate on the pending litigation.

A court will also have to determine how to divide about $2.5 million in assets once held by Durkee in the First California Bank and frozen when the alleged accounting scheme began to unravel.

In Sacramento, U.S. Attorney Benjamin Wagner has released 17 pages of material outlining the government’s case against Durkee, once a favored treasurer among California Democrats. Wagner alleges that Durkee “did devise and participate in a material scheme … to defraud clients.”

To do that, she shuffled hundreds of thousands of dollars between accounts and in many cases used the funds to pay for her own expenses, such as an office and house payments, payroll, credit cards and tickets to Disneyland and Los Angeles Dodgers baseball games.

As part of their case, prosecutors claim that Durkee moved $113,000 out of some other accounts of Democrats and nonprofit groups so that it could be deposited in Davis’ campaign treasury. Prosecutors uncovered three checks — for $72,000, $40,000 and $1,000 — that transferred funds to Davis without her knowledge.

Durkee had direct ties to high-profile San Diego Democrats other than Davis, though they are not mentioned in the federal prosecution.

Durkee at one time served as treasurer for Rep. Bob Filner, who is now running for mayor of San Diego, and Assemblywoman Toni Atkins. She also did accounting for Arlie Ricasa, a Sweetwater school board trustee, and the International Brotherhood of Electrical Workers Local 569.

Durkee’s action also created some headaches for Sen. Christine Kehoe, D-San Diego, three years ago. Kehoe alerted the Los Angeles County District Attorney and Fair Political Practices Commission about possible problems after she learned from a state Franchise Tax Board auditor in 2009 that $57,000 of her campaign account had been moved in a series of questionable transactions.

Nothing came of that request by Kehoe for an investigation, and her case is not part of the charges against Durkee. However, the Fair Political Practices Commission may still be looking into it.